Question

Which of the following is NOT a reason why an investor would choose to invest in new and growing firms as a limited partner in a venture capital firm rather than making those investments directly by​ themselves? Select one: a. Venture capital firms use their control of the companies they invest in to protect those investments. b. The investments of venture capital firm are more diversified than the investments of a single individual. c. The investor will have a direct say in how the companies that the venture capital firm funds will be run. d. A venture capital firm generally has a wide range of expertise among its general partners.

Answer 1

Answer: A.

Venture capital firms use their control of the companies they invest in to protect those investments.

Explanation:

Venture capital is a type of financing that can be obtained through investors. They do not do this for just any startup or company; they provide financing to those that they think will have long-term growth potential and companies from which they believe they can get a good return on their investment.

Start-up companies with the potential to grow to need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists.

Answer 2

c. The investor will have a direct say in how the companies that the venture capital firm funds will be run